MBSB to be full-fledged Islamic bank with AFB acquisition

KUALA LUMPUR: The Malaysia Building Society Bhd (MBSB) is set to be a full-fledged Islamic financial institution with the proposed acquisition of the Asian Finance Bank (AFB) at a total consideration of RM644.95 million.

This sentiment was shared by investors as yesterday, its share price rose six sen to RM1.17 at closing after the company proposed to acquire the entire equity interest in Asian Finance Bank Bhd (AFB) for RM644.95 million.

At close, a total of 23.88 million shares were traded. Trading in MBSB shares, which were halted on Monday, resumed at 9 am yesterday.

The purchase will be satisfied via RM396.89 million in cash and an issuance of 225.51 million new ordinary shares in MBSB at RM1.10 a piece, the non-bank lender said in a filing with Bursa Malaysia.

The proposed issue price represented a one sen discount to MBSB’s closing price of RM1.11 last Friday, and would enlarge MBSB’s share base by 225.51 million shares.

The shareholders of AFB are namely Qatar Islamic Bank, Financial Assets Bahrain W.L.L, RUSD Investment Bank Inc and Tadhamon International Islamic Bank.

It is believed that a merger of the two entities, expected to be completed in the first quarter of 2018, would create the country’s second-largest stand-alone Islamic bank with total assets of RM47.81 billion, after Bank Islam Malaysia Bhd.

Post-acquisition, AFB will become wholly owned subsidiary of MBSB while its previous shareholders will hold a minority interest in MBSB – QIB at 0.73 per cent, RUSD at 1.83 per cent and TIIB at 1.10 per cent.

According to analysts over at MIDF Amanah Investment Bank Bhd (MIDF Research), the valuation of the merger seems fair as it represents a price book valuation (PBV) of 1.3 fold based on net assets as at December 31, 2016 of approximately RM497.26 million, while their valuation of previous financial sector mergers stands at approximately 1.4 fold PBV.

And besides that, the dilutive effect on the group is anticipated to be minimal as the new entity’s growth potential and future value will more than compensate for the dilution in shares.

For the rationale behind this acquisition, MBSB guides that the merged entity is expected to leverage on the strength of MBSB’s business, and the banking license held by AFK is anticipated to provide a unique opportunity for the merged entity to emerge as a full-fledge Islamic banking franchise in Malaysia.

Once AFB is fully acquired by MBSB, the group will emerge as the second biggest Islamic bank in Malaysia after Bank Islam. - Bernama